BICEPS/SSE Riga Research Seminar: Wealth Distribution and Monetary Policy

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We observe differences in net wealth distribution by age among European countries. Western EU countries’ net wealth distribution is consistent with the life cycle hy- pothesis. However in Eastern EU countries, wealth distribution is skewed towards younger ages. The aim of the paper is twofold: first we study the characteristics of economies leading to differences in net wealth distribution by age; second, we eval- uate the impact of these differences on the transmission of monetary policy. To do so, we develop a modified New Keynesian model where the demand side is repre- sented by a multi-period overlapping generations setup and the supply side of the economy follows a New Keynesian framework. The model is used to analyze the interaction between monetary policy and wealth accumulation originated by demo- graphics and productivity-gap among generations in a coherent general equilibrium model. Household Finance and Consumption Survey (HFCS) database is used to calibrate the model for two groups of European countries. We find that the shape of net wealth distribution by age has an important bearing on the effectiveness and hence conduct of monetary policy.What is the target audience? Researchers, PhD students in economics

Ludmila Fadejeva acquired a Master's degree in Economics (Macroeconomic Policy and Financial Markets program) from Barcelona Graduate School of Economics (Spain) in 2011 and Master's degree in Management from the University of Latvia in 2005.

She started her career at the Bank of Latvia in 2006 as an econometrician in the Monetary Policy Department, later she was promoted to the senior econometrician position in the Monetary Research and Forecasting Division.

Ludmila Fadejeva's responsibilities include developing and use of economic research models. Her most recent duties include conducting research using micro and macro data on various economic topics for Latvia and other European countries, e.g. research on labour market, prices and productivity; development of Global VAR model; development of short-term forecast Bayesian VAR and FAVAR models.